Ris­ing gaso­line and rents push US in­fla­tion higher

Home­builder sen­ti­ment rises in Oc­to­ber

WASH­ING­TON: US con­sumer prices recorded their big­gest gain in five months in Septem­ber as the cost of gaso­line and rents surged, point­ing to a steady build-up of in­fla­tion that could keep the Fed­eral Re­serve on track to raise in­ter­est rates in De­cem­ber.

The La­bor De­part­ment said yes­ter­day its Con­sumer Price In­dex in­creased 0.3 per­cent last month after ris­ing 0.2 per­cent in Au­gust. In the 12 months through Septem­ber, the CPI ac­cel­er­ated 1.5 per­cent, the big­gest year-on-year in­crease since Oc­to­ber 2014. The CPI rose 1.1 per­cent in the year to Au­gust. “To­day’s in­fla­tion data are not hot enough to put a rate hike up on the ta­ble next month, but it is also true the econ­omy is strong enough to gen­er­ate some in­fla­tion pres­sures,” said Chris Rup­key, chief econ­o­mist at MUFG Union Bank in New York.

Last month’s in­crease in the CPI was in line with econ­o­mists’ ex­pec­ta­tions. But un­der­ly­ing in­fla­tion showed signs of moder­at­ing amid a slow­down in the pace of in­creases in health­care costs after re­cent ro­bust gains. The so-called core CPI, which strips out food and en­ergy costs, gained 0.1 per­cent last month after climb­ing 0.3 per­cent in Au­gust. That slowed the year-on-year in­crease in the core CPI to 2.2 per­cent fol­low­ing a 2.3 per­cent rise in Au­gust.

The dol­lar ex­tended losses after the data, while Trea­sury prices turned higher. The re­treat in the monthly core CPI read­ing will prob­a­bly do lit­tle to change the view that the Fed will raise in­ter­est rates at its De­cem­ber meet­ing. The US cen­tral bank has a 2 per­cent in­fla­tion tar­get and tracks an in­fla­tion mea­sure which is hov­er­ing at 1.7 per­cent. The Fed lifted its short-term in­ter­est rate last De­cem­ber and has held it steady since be­cause of per­sis­tently low in­fla­tion.

Last month, gaso­line prices jumped 5.8 per­cent after fall­ing 0.9 per­cent in Au­gust. Gaso­line ac­counted for more than half of the in­crease in the CPI last month. Amer­i­cans also paid more for elec­tric­ity, with prices post­ing their big­gest gain since De­cem­ber 2014. House­holds, how­ever, got some relief from food prices, which were un­changed for a third straight month. The cost of food con­sumed at home de­clined for a fifth straight month.

The gov­ern­ment re­vised prices for pre­scrip­tion drugs from May through Au­gust this year as in­cor­rect data had been used to cal­cu­late price changes. Pre­scrip­tion medicine ac­counts for about 1.4 per­cent of the CPI bas­ket.

Mean­while, US home­builders’ con­fi­dence eased this month after surg­ing to the high­est level in nearly a year in Septem­ber. Even so, builders re­main op­ti­mistic over­all about sales growth in months ahead, a re­flec­tion of how steady job gains are lead­ing more Amer­i­cans to buy newly built homes. The Na­tional As­so­ci­a­tion of Home Builders/Wells Fargo builder sen­ti­ment in­dex re­leased yes­ter­day fell two points this month to 63 fol­low­ing a read­ing of 65 in Septem­ber.

Read­ings above 50 in­di­cate more builders view sales con­di­tions as good rather than poor. The in­dex has held above 60 the past two months after hov­er­ing at 58 ear­lier this year. Builders’ view of cur­rent sales and a gauge of traf­fic by prospec­tive buy­ers de­clined. Their out­look for sales over the next six months in­creased. —Agen­cies